An international research has shown that, when compared to the incomes in the capital city of the Republic of Ireland, properties in Dublin are, according to calculations, over their value by 25%.

In fact, according to the same research, the price growth in Dublin has surpassed other global cities over a span of five years. In just five short years, Dublin “beat” 22 global cities to reach this position. Furthermore, the “Economist” magazine’s research has revealed that after the property crash a decade ago, property prices in Dublin have risen by 62%.

Behind the research

In the centre of the research were the median household incomes. In order to get a proper calculation, the Economist compared these income levels with property prices in Dublin. The reason behind that was simple: the magazine wanted to discover if “fundamentals” or “froth” were behind these market dynamics.

And they did find out. While comparing property prices to long-run, mid-level household incomes, the truth became obvious. The house prices in Dublin were actually overvalued — by 25%.

However, this number is still small in comparison to other global cities and their median incomes. Properties in Vancouver show an overvaluation of 65%, while those in Hong Kong are close to 100% with their 94% result. Meanwhile, London properties are double in comparison to Dublin: 50%.

As stated by the Central Statistics Office, a mid-value property in Ireland’s capital is worth €360,000. However, this overvaluation of 25% implies that the average should be €270,000.

Will there be a turning point?

According to the Economist, prices in global cities may be the result of an impending decisive change. The overvaluations, as well as the cost of money, demand, and supply, could imply that the international boom is close to an end. The clearest sign of that is the “bull run” currently happening in the housing market, brought upon by the weak demand, strong supply and high, ever-rising mortgage rates.

Nevertheless, there might be a light at the end of this housing tunnel. In fact, this research comes right when experts predict that the price rises are bound to slow down. That wouldn’t be such a surprise because prices cannot rise forever. They have gone up so much that they have now hit the limits of what people can afford to buy a property.

This sharp slow-down could happen this year, according to property experts. Meanwhile, buyers now have restrictions in terms of what they can bid on because of the Central Bank lending limitations.

The survey says…

The Society of Chartered Surveyors of Ireland has, in collaboration with the Central Bank, carried out a survey. Estate agents, as well as academics, economists and other surveyors have given their opinion. And, according to the survey, most people are expecting a 5% growth in property prices over the next couple of months.

Currently, the rise is at 12%, according to the latest official figures. However, the increases have been slowing down, possibly due to lending limitations by the Central Bank. Furthermore, more properties are now up for sale, which is another sign of the slow-down.

Dublin marks the biggest fall when it comes to growth expectations. The one-year increase prediction has fallen to 2%. What’s more, price growth just might happen in Ireland’s capital. According to experts, or just over half of them, to be exact, this percentage has fallen quite a bit from 98% at the end of last year.